TY - JOUR
AU - Svensson,Lars E.O.
TI - Fixed Exchange Rates as a Means to Price Stability: What Have We Learned
JF - National Bureau of Economic Research Working Paper Series
VL - No. 4504
PY - 1993
Y2 - October 1993
DO - 10.3386/w4504
UR - http://www.nber.org/papers/w4504
L1 - http://www.nber.org/papers/w4504.pdf
N1 - Author contact info:
Lars E.O. Svensson
Department of Economics
Stockholm School of Economics
P.O. Box 6501
SE-11383 Stockholm
Sweden
E-Mail: Leosven@gmail.com
AB - The paper discusses what we have learned from last year's currency crises in ERM and the Nordic countries about fixed exchange rates as a means to achieve price stability. After discussing the explanations for the crises, the paper concludes that fixed exchange rates are not a shortcut to price stability. Monetary stability and credibility have to be built at home and cannot easily be imported from abroad. Fixed exchange rates are more fragile and difficult to maintain than previously thought. They may even be in conflict with price stability, by inducing a procyclical destabilizing monetary policy, and by inducing an inflation bias. Building monetary credibility is even more important with flexible exchange rates.
ER -